Did Apple use its online music monopoly to prevent much smaller competitor Amazon from landing music deals? The U.S. Department of Justice is investigating. (Source: Dave's Whiteboard)

Apple's anti-Amazon moves may cost it some big fines

When
it comes to the digital music sales market, services like Amazon or
Zune Pass have made a minor splash, but Apple has long dominated the
market. Over the last two decades, antitrust regulators in the
U.S. and Europe have imposed fines and restrictions on Microsoft and
Intel to try to prevent them from abusing their dominant position in
several markets. However, they have cast a largely blind eye on
Apple's iTunes -- until now.

Antitrust investigators with the
U.S. Department of Justice are conducting an extensive
inquiry into Apple's online music business, interviewing Apple
employees, internet music company employees, and music label
employees according to the New
York Times.
At the core of the investigation is the allegation that Apple applied
pressure to force music labels not to grant Amazon.com access to
exclusive tracks to help grow the online retailer's fledgling music
market.

A previous investigation was conducted several years
back in the European Union, examining Apple's iTunes pricing
practices. The investigation's conclusions were highly
critical of Apple, but did not levy any fines -- unlike recent EU
investigations into Microsoft and Intel.

In March, it
was reported in Billboard magazine
that Amazon.com would be getting certain songs a day before they were
widely released. It would put these songs in a special
promotional section dubbed "MP3 Daily Deal."
According to the article, Apple hated the idea and threatened music
labels that participated. Specifically, it vowed not to sell
the songs featured in the promotion on iTunes -- a much bigger
marketplace.

ITunes
reportedly owns 69 percent of the online music market, according to
the NPD group. The next closest competitor in the online market is
Amazon, which holds an 8 percent share. The remaining 23 percent are
split up among smaller players.

In
2007 Apple had a mere 12 percent of the total music
market (both online and offline), but it recently became the largest
single seller of music in the world, with 26.7 percent of the overall
market.

Daniel L. Brown, an antitrust lawyer at Sheppard
Mullin Richter & Hampton states, "Certainly if the Justice
Department is getting involved, it raises the possibility of
potential serious problems down the road for Apple. Without
knowing what acts or practices they are targeting, it’s difficult
to say exactly how big a problem this is, but it’s probably
something Apple is already concerned about."

Apple now
has dominant positions in several markets -- tablet computing (iPad),
portable music players (iPod), smart phone applications (iTunes App
Store), and online music (iTunes Music Store). Thus it has
leverage to use its position to damage competitors, if it should so
choose.

The new investigation is at least the fourth antitrust
inquiry into Apple. The U.S. government is also investigating
Apple, Palm and others to see whether the companies illegally agreed
not poach each others' employees (Apple's CEO Steven P. Jobs secretly
suggested such a truce, which appears to be illegal). The
government is also investigating Apple's
ban on Flash for the iPhone or iPad and its decision to
block out ports of Flash titles to native iPhone code. And
there's also a pending investigation about whether board
members serving
on both Apple's and Google's boards violated antitrust
laws.

ITunes first launched in 2001 and has long been on the
forefront of the push for legal online music downloads. Apple
has sold over 10 billion tracks on iTunes to date, and has become one
of the biggest revenue sources for the struggling music industry.
Apple also has supported a number of smaller independent artists by
promoting them and giving them tools to expose their work to a
broader audience. Apple also has recently made some steps to
increase competition, such as allowing streaming music services such
as Pandora and Rhapsody onto Apple devices.

Spokespeople for
Apple and Amazon would not comment on the inquiry. Gina
Talamona, a deputy director at the Justice Department, also had no
comment.

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This article is over a month old, voting and posting comments is disabled

For me, I prefer to keep my music at a smaller size, as I put more than just music on my mp3 player. The music on my mp3 player takes up a little over 4 gigs. That's 320k mp3s. The rest of the 32 gigs is storing pictures and videos. It also has a mini-SD slot on it, which has another 16 gig card with videos.

Course, I use my player to listen to music, watch movies, and temporary portable storage.